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THE IMPORTANCE of TRANSPARENCY in CORPORATE GOVERNANCE: the FIFA and UEFA CASES LLM International Business Law, Tilburg Law Sc

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THE IMPORTANCE of TRANSPARENCY in CORPORATE GOVERNANCE: the FIFA and UEFA CASES LLM International Business Law, Tilburg Law Sc THE IMPORTANCE OF TRANSPARENCY IN CORPORATE GOVERNANCE: THE FIFA AND UEFA CASES LLM International Business Law, Tilburg Law School Supervisor – Prof. Erik P.M. Vermeulen Author – Volodymyr Kravets June 10, 2016 Tilburg Contents Introduction………………………………………………………………………………………………………………………….3 1st chapter…………………………………………………………………………………..…………………………….………… 5 Establishment and development of FIFA and UEFA……………………………………………………………….5 2nd chapter.……………………………………………………………………………………………………………………..…...8 Structure of FIFA and UEFA ……………………………………………………………..…….………………………….…8 3rd chapter …………………………………………………………………………….…………..…………………………….…16 Features and characteristics of non-profit organizations ……………………………………….……………16 4th chapter ……………………………………………………………..……………………………………………….……….…20 Financial performance of FIFA and UEFA ………………………………………………….…….………………..…20 5th chapter……………………………………………………………..………………………………………………….….….…23 5.1 Role of stakeholders……………………………………………………………..………………..………….……….…23 5.2 How the main stakeholders influence on FIFA and UEFA…………………………….…………………26 6th chapter ……………………………………………………………..………………………………………….…………….…29 6.1 New challenges for FIFA and UEFA ……………………………………………….…………….……..…………29 6.2 Lack of transparency in making decisions ……………………………………………..…….…………..……31 7th chapter ……………………………………………………………..…………………………………………….………….…33 7.1 Ways of future development ……………………………………………………………..………..……………….33 7.2 Possibility and benefits of invitation of independent CEO.…………………………….………………34 7.3 Possibility and benefits of FIFA and UEFA merger………………………………………………………….35 Conclusion ……………………………………………………………..………………………………………………….…….…40 Bibliography……………………………………………………………..………………………………………………..…….…41 2 Introduction Pierre de Coubertin, the founder of the modern Olympic Games once said: "Sport is part of every man and woman's heritage and its absence can never be compensated for1." For over several decades a deep concern about the governance standards of sport have surfaced in the global community. In the past couple of years, however, the accumulation of scandals in sport has grown so intensely that the credibility of sport and its organizations is shaken fundamentally, threatening the public trust in sport as a lever of positive social and cultural values in democratic societies2. Everybody knows what football is, somebody calls it soccer. There is no other issue or event in the world which can unite people of different countries, nationalities, and religious as good as football. Some people think that this is just a simple game. For most people it’s not just a game, its culture, philosophy and passion. For somebody football is a whole life. But football is not organized chaotically. It is very professionally governed, structuralized and managed. The most successful and well known football organizations in the world are Federation Internationale de Football Association (FIFA) and a Confederation recognized by FIFA – The Union des Associations Europeennes de Football3 (UEFA, English version the Union of European Football Associations). Both organizations are neutral politically and religiously situated in Switzerland and are registered under Article 60 of Swiss Civil Code. Both associations had scandals for the last few years and both replaced their presidents. The fact of being of great value of this topic is a justification for both FIFA and UEFA believably the brightest examples of how the neutral associations can have a global impact and how transparency is important in their decision making. This example shows that reputation can be more influential than real enforcement. Within the time football had grown from just an interest of a Sunday match to a global concern of system of values which have impact on current life of million ordinary people, governments, countries and the whole continents. For instance of case the particular country gets the opportunity to host the tournament like FIFA World Cup 2014 or UEFA EURO 2012, it changes development of the country significantly. First of all, ordinary citizens feel the responsibility and global destiny of their country because of the attention of the whole world and capacity to invite and to host tourists and football supporters from all over the world. Then the economy of the country changes to the frame of tournaments requirements in response to build new stadiums, hotels, roads and other infrastructure needed for the comfortable hospitality. Considering above mentioned, the importance of FIFA and UEFA efforts of organizational conducts is difficult to overestimate. These organizations have a great social impact in modern world. FIFA and UEFA both participate in struggle against all forms of racism and discrimination, violence and hooliganism, and match-fixing. FIFA and UEFA spread the values and principles which are acceptable in every country in the world. But the new world is emerging and global relationship mean that we can 1 Pierre de Coubertin (1863-1937), French pedagogue and historian, founder of the modern Olympic Games. 2 Danish Institute for Sports Studies: Action for Good Governance in International Sport Organizations, p. 6. 3 Article 1 of the UEFA Statutes, 2016 edition 3 no longer rely on traditional forms of coordination which were oriented around hierarchical and command and control based relationships4. All of the stakeholders in associations like FIFA and UEFA are less comfortable with the idea being told what to do and they will opt to leave if the working environment fails to deliver. In the past, such fixed organizational forms provided a source of comfort, but now it merely frustrates or irritates. In its statutes UEFA formally declares that it is a sporting authority which does not have the powers of a government, it represents Europe’s national football associations, and can only act in accordance with the wishes of these associations5. The last example with so called Panama Papers showed that now for the global community it is not enough just to face the legal requirements, and avoiding illegalness doesn’t keep you in safe, because when the organization declares transparency and honesty but doesn’t hold it – troubles will appear very soon. The Prime Minister of Iceland resigned because of being not honest with his citizens. Honesty means a lot. Honesty means trust. For example the whole banking system is built on trust. Let’s imagine the situation when the clients do not trust a bank anymore. It is needed only 20 percent of clients to withdraw their deposits and the bank will collapse. The same is with FIFA and UEFA if people won’t trust them and won’t believe in values they expose, there will be no value of what they are doing, sponsors and official partners won’t support them, those associations will be destroyed from inside. The FIFA and UEFA both have very pure purposes for the world like policy against discrimination, against racism, but at the same time they have many internal problems, and there are always scandals with transparency in policy of decision making. The FIFA and UEFA are both non-governmental and non-profitable, but at the same time they are associations with colossal revenues, unprecedented global reach, political weight, and tremendous social influence. This unique status, setting sports organizations apart from both non-governmental organizations and commercial corporations, constitutes a challenge for specifying the exact best governance practices applicable to them6. At the same time the FIFA and UEFA conduct these activities with lack of transparency. Principles of transparency and honesty are very important because the global communication is based on trust. Without trust to government commonly it will end up with governmental resignation, when people don’t trust to private company it means the company can become bankrupt, but if people stop believing in such organizations like FIFA and UEFA the system of global traditional values can collapse. The best explanation of worlds harassment about screaming violence of basic principles and unwilling to develop the organization’s transparency, its activity and performance can be the former FIFA President’s Mr. S. Blatter quotation: "Let it be as it is and let's leave (football) with errors. The television companies will have the right to say (the referee) was right or wrong, but still the referee makes the decision — a man, not a machine.7" 4 Mark Fenwick, Erik P.M. Vermeulen: Disclosure of Beneficial Ownership after the Panama Papers, p. 33. 5 Article 2 of the UEFA Statutes, 2016 edition 6 Danish Institute for Sports Studies: Action for Good Governance in International Sport Organizations, p. 104-127 7 http://www.cbc.ca/sports/fifa-halts-instant-replay-experiment-1.695604 4 1st chapter Establishment and development of FIFA and UEFA The FIFA is an association founded on 21 May 1904 in Paris now based in Zurich and registered in the Commercial Register in accordance with art. 60 ff. of the Swiss Civil Code8. The FIFA was established as a non-profit organization and governed by Swiss law. The first countries that formed it were: France, the Netherlands, Belgium, Denmark, Portugal, Sweden and Switzerland. Now, it has reached to 209 member associations. Because it was established in France, the French abbreviation of its name is still used (Fédération Internationale de Football Association – FIFA) worldwide. Robert Guérin was the first President of the Association – a 28 years old French journalist. It is interesting that the first member country outside Europe was South Africa, which joined FIFA in 1908. Since
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